Eurotunnel put a key element of its financial restructuring in place yesterday by signing a binding agreement with a group of senior lenders under which creditors would emerge with more than 80 per cent of the company in return for writing off half of the tunnel's £6.2bn of debt.
However, the agreement still has to be approved by junior bondholders and shareholders before it can be put into effect, and Eurotunnel also has to arrange financing from Goldman Sachs and Macquarie, who between them are putting up £1bn of hybrid debt convertible into shares in three years time.
Eurotunnel said that it was seeking permission to postpone its annual general meeting from 30 June to 12 July to allow it to hammer out a deal and to give shareholders sufficient time to consider the restructuring before voting on it.
The financial restructuring will give Eurotunnel an enterprise value of about £4bn - of which £3bn will be in the form of senior and mezzanine debt and £1bn will be shared by bondholders, shareholders and those who subscribe to the convertible note being issued by Macquarie and Goldman's.
Eurotunnel is still hopeful that an outline agreement with all its creditors can be announced before the end of this month. However, a source in the creditors' camp said: "If you think of this as the 4x400 relay in the Olympics, then the baton has just changed hands for the first time. Much hard work remains to be done."
Eurotunnel said it had signed the binding agreement with the ad hoc committee, which represents just over 70 per cent of its debt and is comprised of the European Investment Bank, Franklin Mutual Advisers, Ambac, MBIA and Oaktree Capital Management.
It said that discussions would now continue with other lenders, including bondholders. The bondholders control £1.9bn of Eurotunnel debt and are pressing to be bought out at par, but Eurotunnel argues that many of them bought in at a fraction of the bonds' face value.
In order for shareholders to approve the restructuring, 25 per cent by value have to vote and the vote has to be 75 per cent in favour. The Eurotunnel chairman, Jacques Gounon, initially said there would be no dilution for existing shareholders, and there is a possibility that Nicolas Miguet, the rebel investor who forced out the previous board, could yet lead another shareholder revolt.
But one creditor said: "It is a question of whether shareholders want 100 per cent of a cake which is worth nothing or a smaller share of a cake which will be able to pay a dividend."